More vehicle data could stall motor claims losses

Authored Tom Lawrie-Fussey, director of automotive, UK & Ireland, LexisNexis Risk Solutions

A dichotomy is emerging in the U.K. car parc. The number of vehicles with Advanced Driver Assistance Systems (ADAS) is growing. Meanwhile, the average age of the U.K car parc is increasing. Furthermore, over half of drivers are concerned about being able to carry out timely repairs to their vehicle as well as the cost of servicing, raising issues over safety, both now and in the future.

These two diverging trends are proving a headache for motor insurance providers as they endeavour to get to ‘know the metal’ to provide accurate and fair quotes to customers and settle claims quickly. As motor insurance remains in the top five most-complained-about products at the Financial Ombudsman Service, the Financial Conduct Authority (FCA) has warned insurers not to undervalue cars. Yet, there are so many factors at play in reaching a fair quote and a fair value including age, mileage, condition, maintenance and service records. This is all aside from supply chain issues that have kept used car values at historic highs.

So how can motor insurance providers ensure they are pricing cover and valuing vehicles in a way that truly factors for the risk posed for each and every car in their books of business?

Driving down to the detail

There is no doubt that driver information such as claims history and number of years’ driving experience will continue to play a massive role in assessing risk. It is the life story of the vehicle itself, however, that also needs to be front and centre as the U.K. car parc evolves. This is where the use of granular, vehicle centric data that can offer unique insights and benefits when calculating risk, comes to the fore.

In order to assess risk fairly, insurance providers must establish not only what safety features a vehicle has but it’s life story too, then use this data to examine how it will impact the quote or claim journey. 

The problem is that accessing accurate, real-time information from one source on the vehicle’s status, value and history, including how well it’s been maintained, has not previously been possible. If insurance providers could have this level of detail from the point of quote onwards through the life of the policy, they would be in a far more informed position to enhance the customer experience, more accurately predict claims frequency and cost and limit their losses.

A one stop shop of data enrichment for the entire U.K. car parc has now launched to address these challenges head on. Through a choice of different data modules, LexisNexis® Vehicle Insights offers a timeline of information on a specific vehicle to support claims and underwriting teams; the current status including MOT and road tax, real-time mileage and valuation information and finally a unique proxy for risk based on how the policyholder manages their vehicle and its ongoing requirements.

A deep dive into MOT data is especially useful for assessing the risk of older cars because, as well as giving details on when MOTs have been carried out, it also highlights the number of safety advisories a vehicle has been given in that test, including a trend analysis on whether they have been left unchecked. 

As economic pressures mean many people do not have the funds to correct safety-related issues; it is easy to see how critical it is for an insurance provider to have this information to hand to assess overall risk and some may use it as an opportunity to encourage customers to take a ‘stitch in time to save nine’ approach and get work done, rather than risk an accident.

Research suggests that the ability to afford vehicle maintenance is compromising the safety of drivers and other road users with one in four drivers admitting to getting behind the wheel knowing their vehicle needs essential work.

Accurate appraisal for precise valuation

Neglected vehicles may well lead to more accidents and unfortunately write-offs and when it comes to valuing vehicles for insurance purposes. Times are also changing. With so much information available online, consumers are armed with sources to value their own vehicle. To avoid disputes, insurance providers who can source a valuation reflecting today’s retail dynamic are at an advantage.

Despite the valuation services available online, there will always be vehicles that do not conform to type. Machine learning can now help insurance providers ‘fill in the blanks’, removing subjectivity and fine-tuning a vehicle assessment to provide the most transparent valuation possible.

Cutting the risk of accidents can mean cutting the price of insurance too

Once an insurance provider has built a better picture of the vehicle’s history the natural next step is to understand if Advanced Driver Assistance (ADAS) features are present, and if so, how they perform. As such, we envisage LexisNexis® Vehicle Insights and LexisNexis® Vehicle Build - our ADAS data enrichment solution – working very successfully as complementary products.

The end goal is to put the U.K. motor insurance market in a far more informed position to support their customers and reduce losses based on the most comprehensive view of the vehicle, from the first day of its life to present day.

If you would like to talk to Tom Lawrie-Fussey about the issues raised in his article, CLICK HERE, leave a message and youTalk-insurance will pass your enquiry on